Why Carnival, Norwegian Cruise, and Royal Caribbean Stocks Dropped Again Today
Cruise tourism stocks weren't immune from the stock market rout on Monday. As we sail into the final hour of trading, shares of all the major publicly traded cruise line companies -- Royal Caribbean (NYSE: RCL) , Norwegian Cruise Line Holdings (NYSE: NCLH) , and Carnival Corporation (NYSE: CCL) -- are low in the water, down 1.8%, 2%, and 3.2%, respectively, as of 3:20 p.m. ET.
Cruise stocks faced a whole series of "wall of worries" today. First, there are familiar concerns over the continuing pandemic and how it might affect cruise demand, and the CDC's warning still isn't helping with that. Last week brought worries that higher interest rates might make paying down cruise line debt difficult. Our latest concern is that Russia might invade Ukraine ( again! ), and upset stock markets even more.
Of the three, I believe that the mixed messaging from the CDC about whether cruises are safe, and the risk of interest rate hikes making debt refinancing more expensive, are the concerns investors should focus on. However, a Russian invasion of Ukraine wouldn't likely affect cruise tourism much at all in the Caribbean or even in the Mediterranean markets, but only in the Black Sea.
That being said, an expanding conflict between Russia and Ukraine would have some effect on the Black Sea market. While not a big part of their operations, each of Carnival, Royal Caribbean, and Norwegian Cruise do run some cruises in the Black Sea, and you have to assume those cruises would be canceled in the event bullets begin flying in the region.
A corollary concern that investors should also keep on their radar is the widely floated theory that China might use the presumed distraction created by a Russian invasion of Ukraine to launch an assault of its own on Taiwan. Ordinarily, of course, military conflicts primarily concern investors in defense stocks . But a scenario in which war breaks out between China and Taiwan, and potentially draws in allied nations in the region, would have vast implications for the much larger cruise tourism market in Southeast Asia and the South Pacific.
Even a remote possibility like this one would have a significant enough effect upon cruise stocks that I think investors need to be aware that it's a possibility -- and a potential catalyst that could push cruise stocks even lower.
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